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Speaker 1: This is Bloomberg Surveillance. Regulatory rules over the last five

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Speaker 1: years had made it very difficult for any bank to

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Speaker 1: optimize their balance shape. The story as earnings will unfold

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Speaker 1: is everybody will tell you, well, the companies are doing

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Speaker 1: better than we thought they do every quarter. If you

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Speaker 1: get in oil prices into the fifty and fifty five

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Speaker 1: dollar range, you know we've got fifteen billion barrels of resource.

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Speaker 1: That's economic. Bloomberg surveilance your link to the world of economics,

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Speaker 1: finance and investment on Bloomberg Radio. Good morning, Michael McKee

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Speaker 1: along with Tom Keene. It is seven am on Wall Street,

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Speaker 1: eight am in Brazilia and two pm in Doha, where

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Speaker 1: nothing happened. Talks aimed at capping oil production as much

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Speaker 1: of a fiction as that was failed, and oil prices

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Speaker 1: are down. In Brazil, President del marussof is impeached. What

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Speaker 1: is somewhat striking about both events how limited the impact

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Speaker 1: on markets has been. Right now, oil prices are trading

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Speaker 1: at UH thirty nine dollars and five cents for West

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Speaker 1: Texas sets down three and a quarter percent. Brent crude

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Speaker 1: off three percent on the day. Equity markets, though not

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Speaker 1: reflecting a huge decline. They're lower. The stock six hundred

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Speaker 1: in Europe is down by less than a point, about

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Speaker 1: a tenth of a percent. The decks higher today six

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Speaker 1: points up about a tenth. In the US, futures have

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Speaker 1: been trading in a range right now six points lower.

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Speaker 1: For S and P futures, they're off three tents down.

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Speaker 1: Features are down by thirty nine points, two tents of

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Speaker 1: eight percent in Nasdaq. EMNI features down eleven points, two

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Speaker 1: tenths as well. In Brazil, a quick check of the

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Speaker 1: real shows that it is a lower for the moment. UH,

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Speaker 1: give you a quote three point five three to one,

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Speaker 1: actually gone higher after the impeachment of the of the

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Speaker 1: president there by mistake. The Bovespa has not started has well,

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Speaker 1: just started trading and it is up fift right now,

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Speaker 1: up by eight hundred and sixteen points. So you can

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Speaker 1: see the reaction in Brazil to what's going on. Adds

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Speaker 1: to the interesting reaction in the markets today. No real

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Speaker 1: flight to safety. The dollar index on the day is lower,

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Speaker 1: and we're looking at euro trading at one stronger on

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Speaker 1: the day. UH. The end is down a little bit

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Speaker 1: one thirty five. Of course, earthquake reaction there. Bonds little

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Speaker 1: changed on the day. The tenure no yield unchanged at

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Speaker 1: one point seven percent, the five year unchanged at one

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Speaker 1: point to one percent, the two year just a touch

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Speaker 1: higher seventy four basis points. Right now German two year

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Speaker 1: is lower, the yield a little bit higher negative fifty

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Speaker 1: one basis points. We also have some earnings just out.

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Speaker 1: Morgan Stanley fifty cents to share, the consensus of analysts

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Speaker 1: surveyed forty seven cents. First quarter revenue of seven point

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Speaker 1: seven nine billion, better than the consensus of seven point

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Speaker 1: seven six billion. Alison Williams covers the banking industry for

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Speaker 1: Bloomberg Intelligence. Allison, I'm also seeing notes that suggest that

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Speaker 1: while the numbers were better than the consensus forecasts, they're

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Speaker 1: certainly down from previous performance. They are down, and um

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Speaker 1: estimates were coming down going into the quarter, just because

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Speaker 1: the year had been off to such a rough start.

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Speaker 1: So I guess I would I would call this beating

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Speaker 1: a lower bar. That's similar to what we've seen at

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Speaker 1: some of the other banks. So revenue coming in, as

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Speaker 1: you pointed out, a bit better than expected on both

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Speaker 1: uh When we look at trading, both fixed income and

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Speaker 1: equities trading coming in a bit better than expected. But

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Speaker 1: I think another key positive is it looks like costs

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Speaker 1: also better than expected, and that's that's what the stocks

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Speaker 1: have really been reacting to this quarter because we the

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Speaker 1: environment is tough. We know it's a tough and vironment,

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Speaker 1: but investors want to see that banks are doing what

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Speaker 1: they can to control what they can and really focusing

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Speaker 1: on the costline. Elson, wonderful to have you with us.

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Speaker 1: Good morning. Have you one Bloomberg surveillance brought you this Monday?

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Speaker 1: Buy Investco markets may be volatile and Investo's value managers

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Speaker 1: are finding high conviction opportunities find out where and investco

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Speaker 1: dot com slash interactive. Allison, you've been out front on

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Speaker 1: analyzing with their wealth management and the dynamic of wealth management.

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Speaker 1: Morgan Stanley was way out front. Are they winning at

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Speaker 1: wealth management or they catching up the Ubs and every

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Speaker 1: other business planet's out there. Well, I think Morgan Stanley,

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Speaker 1: as you pointed out, they were out front in terms

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Speaker 1: of focusing more on the business. I would say maybe

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Speaker 1: the slight difference between Ubas and Morgan Stanley is UBS

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Speaker 1: has long been a leader in global wealth management and

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Speaker 1: specifically areas like Asia and the emerging markets where there's

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Speaker 1: a lot of long term growth. Morgan Stanley, as you

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Speaker 1: did a very big transaction that increased their SHAREFF earnings

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Speaker 1: that come from Wealth management UM, specifically the Smith Barney venture,

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Speaker 1: which you know they bought more and more of it

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Speaker 1: now have fully UM have fully owned, and so it's

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Speaker 1: they're shifting the mix more towards that business, which has

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Speaker 1: been helpful. UM. No one is sort of immune to

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Speaker 1: this tougher environments. Everyone's feeling the pain, but wealth management

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Speaker 1: does tend to be more of a recurring revenue, higher

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Speaker 1: multiple type business UM. This quarter, it looks like their

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Speaker 1: wealth management margin is came in at again just trying

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Speaker 1: to go through the numbers, and their target for that

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Speaker 1: business is a little higher, So I think UM investors

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Speaker 1: are going to be looking for them to bring up

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Speaker 1: that margin throughout the year. Alison Williams covers the banking

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Speaker 1: industry for Bloomberg Intelligence. Morgan Stanley first quarter profit down,

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Speaker 1: but they beat on a perth share basis since this

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Speaker 1: was for forty seven and the shares tom all right

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Speaker 1: now in pre market trading up one there we go.

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Speaker 1: We even steam gusts to follow on our discussion this morning,

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Speaker 1: Richard hass with us with the Consul on Foreign Relations,

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Speaker 1: we got about eight ways to go. I guess I've

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Speaker 1: got to go back to your recent travels to South America. UM,

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Speaker 1: you have been very vocal about this as a brazil

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Speaker 1: distracted by politics that needs to get back to the economics.

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Speaker 1: Is the Lula era over a twenty year experiment. I

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Speaker 1: don't think it's over. In two ways. One is, he

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Speaker 1: himself may not be over. He faces all sorts of

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Speaker 1: legal challenges, as you know, but it's not a crazy

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Speaker 1: scenario that he could run and even conceivably win in

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Speaker 1: the twenty eight presidential elections. So it's too soon to

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Speaker 1: write his political obituary. Second of all, lula Ism UH

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Speaker 1: is still a powerful factor in in Brazilian politics. Lulaism

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Speaker 1: is for people listening. It's obviously a fairly robust, large

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Speaker 1: state role, a large safety net, more than than anything

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Speaker 1: else to hold Bolsa familia idea of direct cash payments

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Speaker 1: to Brazilians below a certain level of income, and that

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Speaker 1: has transformed Brazilian politics. The problem is now that it's

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Speaker 1: at a level that can't be sustained. So for lula

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Speaker 1: Ism to survive, it would actually have to be reformed.

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Speaker 1: And I think the real question is will the opposition

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Speaker 1: be willing to do that, and what kind of a

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Speaker 1: political price will the Vice president and those around and

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Speaker 1: pay if they actually do. Like there's embassador House to

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Speaker 1: know that if we steal a phrase from someone like

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Speaker 1: lula Ism, he gets a royalty check. Yes, and you're

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Speaker 1: gonna be signing those checks on a regular basis going forward.

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Speaker 1: Here I was hoping for fuzzy dice as we as

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Speaker 1: we look at what happens in Brazil going forward, you

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Speaker 1: have to ask, was lula Ism a failure or is

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Speaker 1: it a failure of those who are in office? More

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Speaker 1: the latter, I think the actual introduction of it was

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Speaker 1: important that a lot of Brazilians out of poverty maybe

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Speaker 1: into kind of a lower middle class life. That was

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Speaker 1: all to the good. The idea of having a social

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Speaker 1: nation safety net is is obviously a welcome idea. What

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Speaker 1: happened was it got out of control, particularly under his

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Speaker 1: success or under the President Russov. It bloated the entire

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Speaker 1: public sector, and on top of that you had a

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Speaker 1: degree of corruption. The solulasm also came to me, not

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Speaker 1: just a large role of the state in the economy,

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Speaker 1: but a large the potential for corruption became a temptation

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Speaker 1: that people couldn't resist, particularly with the state owned oil company,

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Speaker 1: but but more broadly, solula ism led not just to

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Speaker 1: a large safety net, but an overly large safety net

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Speaker 1: and then a massive corruption. Later on in the program,

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Speaker 1: we're going to have one of your experts from CFR,

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Speaker 1: Shannon O'Neil, come break down some of the real nitty

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Speaker 1: gritty specifics of what happens next in Brazil. But I

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Speaker 1: let the real nitty gritty, the real nitty great exactly.

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Speaker 1: I'm interested in what it means for South America, for

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Speaker 1: Latin America as a whole. It's a great question. There's

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Speaker 1: actually two narratives in South America right now. One is

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Speaker 1: the one of a large state sector, and that represented Brazil, Venezuela, Cuba,

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Speaker 1: and I think that's in remission. I think that is

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Speaker 1: historically now fighting a larger tide of one of our

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Speaker 1: reduced state role, a little bit more of a market,

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Speaker 1: more democratic, and I think more than anyone else, it's

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Speaker 1: President Mochari and Argentina who represents the alternative tendency. But

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Speaker 1: we've also seen it in Colombia, Chile to some extent

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Speaker 1: in Mexico. So you have two narratives in the Americas,

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Speaker 1: and the much more powerful and I would argue a

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Speaker 1: much more attractive narrative. Is this one towards greater degree

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Speaker 1: of markets, greater degree of democracy? Well, does that mean

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Speaker 1: that there is a turn towards the capitalist model or

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Speaker 1: is it just you know that that the big state

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Speaker 1: sector is kind of out. In other words, it did

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Speaker 1: one side win and the hither loose. Well again, I

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Speaker 1: think the census that the state sector dominant has gone

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Speaker 1: too far. It leads to corruption and if ficiency economically

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Speaker 1: lower growth and corruption, and instead we're seeing the reaction.

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Speaker 1: I think the most interesting person to watch as President

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Speaker 1: Macari and Argentina the kind of reforms he is doing,

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Speaker 1: so he has become important not just for his country

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Speaker 1: but actually for the entire region. If Macri succeeds, it

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Speaker 1: actually has a tremendous momentum effect beyond Argentina's boarder. Unfortunately,

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Speaker 1: fifteen seconds. Would you go to the Olympics in real

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Speaker 1: or will they be I mean, are they going to

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Speaker 1: be like a stable mega event or not? I mean, personally,

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Speaker 1: I was hoping to make it in the PO vault,

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Speaker 1: and it didn't work out this year. So I hope

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Speaker 1: you going personally, I think you got to worry about

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Speaker 1: Zica and Mosquitoes, and I think you know, just a

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Speaker 1: lack of infrastructure is not going to be an easy

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Speaker 1: event to go to. I'm just trying to get up

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Speaker 1: here as quick as I can Oberlin Track, and somehow

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Speaker 1: I can't get it up Richard oas thank you so much.

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Speaker 1: As always with the Council on Foreign Relations, Marcus Churning

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Speaker 1: At seven ten, I will street this hour surveillance brought

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Speaker 1: you by Palisay Doughty. Visit palisad Doughty dot com. Here's

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Speaker 1: Michael Barr with news headlines. Mike Tom, thank you very much.

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Speaker 1: A hot button immigration issues before the Supreme Court for

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Speaker 1: Oral arguments today. The Obama administration is asking the justices

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Speaker 1: to allow two programs that could shield roughly four million

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Speaker 1: people from deportation to make them eligible to work in

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Speaker 1: the US. Texas is leading twenty six mostly Republican states

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Speaker 1: in opposition. Tomorrow is the New York primary. Front runners

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Speaker 1: Republican Donald Trump and Democrat Hillary Clinton are hoping to

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Speaker 1: put some distance between themselves and their competitors. Brazilian President

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Speaker 1: del Maroussof's future is an even greater down today after

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Speaker 1: the Chamber of Deputies voted to open impeachment proceedings. He

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Speaker 1: will be up to the Senate to put her on trial.

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Speaker 1: Global News twenty four hours a day, powered by our

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Speaker 1: twenty four hundred journalists and more than a hundred fifty

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Speaker 1: news bureaus from around the world. I'm Michael Barr, Like

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Speaker 1: Tom Michael Barr. Thanks so much. Obal in College Track

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Speaker 1: and Field at the All Ohio Championships hosted by Ohio

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Speaker 1: Wesleyan Boo. More than that. Coming up. Bloom Surveillance on

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Speaker 1: and on your radio. This is a Bloomberg Business Flash

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Speaker 1: and I'm Karen Moscow. This updates brought to you by

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Speaker 1: Eisener Amper, Hedge Week, Institutional Investor. All credit Intelligence. Fund

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Speaker 1: slash excellence. Morgen Is Stanley saying first quarter profit dropped

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Speaker 1: fifty three percent as revenue from trading and underwriting securities declined.

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Speaker 1: Shares are higher and early trading up to percent as

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Speaker 1: profit was better than analysts. We're looking for PepsiCo post

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Speaker 1: first quarter profit that also beat analysts estimates. S and

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Speaker 1: B EVENY futures down seven points this morning, DOWE EUNY

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Speaker 1: futures down forty five, NASA DOC EUNY futures down thirteen.

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Speaker 1: The tenure Treasury up to thirty seconds, the yelled one

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Speaker 1: point seven four percent. Nimex hert oil dropping down three

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Speaker 1: point six per cent or a dollar forty six to

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Speaker 1: thirty eight. Ninety barrel comes gold is a four tenths

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Speaker 1: per cent or four dollars eighty cents to twelve forty announced.

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Speaker 1: The euro a dollar thirteen oh seven. The end one

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Speaker 1: oh eight point three six. That's a Bloomberg business flash.

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Speaker 1: Tom and Mike Karen, thanks so much. Good Monday morning, everyone,

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Speaker 1: on economics, finance, investment, on the international relations. Michael McKee

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Speaker 1: and Tom King, We welcome all of you to what

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Speaker 1: I think will be the most interestinging Michael, why don't

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Speaker 1: you pick it up with your observations on oil which

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Speaker 1: broke yesterday. Well, there was supposed to be some sort

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Speaker 1: of agreement to limit production coming out of this Doha meeting.

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Speaker 1: Did not happen. Saudi Arabia, which had said it wanted

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Speaker 1: to put something in place, suddenly took a hard line

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Speaker 1: over the weekend. And I'm wondering Richard hass Richard is

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Speaker 1: with it, for he is the president, of course of

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Speaker 1: the count for relations. What this says about Saudi Arabia, Iran, OPEC,

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Speaker 1: in the Middle East in general, Well, let start with

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Speaker 1: the last What the Middle East that tells you about

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Speaker 1: is that there are more fault lines in the Middle

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Speaker 1: East than there aren't any other geologic formation. And by

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Speaker 1: that I mean these are political fault lines. And one

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Speaker 1: of the most powerful and pronounced is the Persian Sunni

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Speaker 1: and the Shia Suni is and in this case Iran

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Speaker 1: sty fault lines and they can't agree on anything, particularly

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Speaker 1: the sody c c Iran as their greatest geopolitical thread,

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Speaker 1: even more say than a group like like Isis, and

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Speaker 1: in order for a cartel like OPEC to work, there

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Speaker 1: has to be a bit of trust, a little bit

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Speaker 1: of confidence that others will observe whatever limits and production

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Speaker 1: or output or set. And obviously that that such trust

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Speaker 1: is non existent. Yeah, people have been saying that OPEC

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Speaker 1: is falling apart. This would seem to suggest it has

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Speaker 1: almost no credibility left. It's got very little. And also

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Speaker 1: its share of globe oil is a little bit less

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Speaker 1: given in the the United States, given Russia, two of the

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Speaker 1: three largest oil producers, and now the United States and Russia, uh,

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Speaker 1: Saudi Arabia simply uh, you know, one of the top three.

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Speaker 1: So yeah, I think opex stranglehold over world oil as

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Speaker 1: less than it was simply mathematically. And then the internal

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Speaker 1: politics so much weaker than they were when we look

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Speaker 1: at oil. Part of it is demand. You see if

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Speaker 1: I mean I remember a moment and see if I

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Speaker 1: were you at Edward Morrison other Worthies up on stage

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Speaker 1: and you could hear Pinder up in the room. You know,

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Speaker 1: supply supply, supply, Doha and all this. We have to

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Speaker 1: use this stuff to see a fire. Have a structural

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Speaker 1: belief that we're just not going to use this stuff

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Speaker 1: someday we'll see. If far doesn't have structural beliefs in anything,

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Speaker 1: we don't take institutional positions. I think the predictions that

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Speaker 1: oil will be eliminated from the global economy are it's

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Speaker 1: gonna be much slower and much less than people always say. Um.

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Speaker 1: Almost every prediction about what can I say, is wrong.

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Speaker 1: I don't care what it is. It's always wrong, whether

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Speaker 1: it's price, whether it's supply, whether it's peak this or

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Speaker 1: elimination that. So sure, you know, I think alternatives will

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Speaker 1: play a larger role. But the biggest reason right now

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Speaker 1: that you know demand is down is is economic. But

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Speaker 1: a side show is the fact that alternatives are are

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Speaker 1: going from kind of peripheral to increasingly uh significant. But no,

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Speaker 1: the the oil era will last far longer than the

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Speaker 1: than the pundits and the predictors, uh you know we're saying.

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Speaker 1: Let me ask you, then, will the Saudi uh government,

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Speaker 1: the family control over Saudi Arabia last as long as

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Speaker 1: oil you're talking about? That's that's a fair question. I'm skeptical.

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Speaker 1: I think the Saudis face enormous challenges. One from the

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Speaker 1: local value of the price of oil. Second of all,

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Speaker 1: they've overreached significantly in Yemen. I keep saying, this is

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Speaker 1: Saudi Arabia's Vietnam. Their royal in fighting is really bad

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Speaker 1: about generational succession. I think also corruption is significant, and

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Speaker 1: this is a very digital society. So if you're a

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Speaker 1: group like ISIS, I actually think Saudi Arabia is somewhat

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Speaker 1: of a vulnerable target and as ISIS loses territorial control

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Speaker 1: in places like Saria, I would not be surprised if

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Speaker 1: if their next big plays for Saudi Arabia. We have

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Speaker 1: a fabulous international audience. And Mohammed tweeted to me and

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Speaker 1: I had to out on Twitter correct it was Mike.

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Speaker 1: It was a massive surveillance correction. I was vamping, you know,

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Speaker 1: earlier this morning on the genealogy of the royal family,

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Speaker 1: and I said, is his great grandfather Gregor that's Bologny

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Speaker 1: King Faisal is the brother of Salmon, the present king.

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Speaker 1: I forgot that. I mean, it's amazing the almost longitude

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Speaker 1: of the royal family. Salomon is the last of the generation.

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Speaker 1: And that's why now the succession struggle is between the

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Speaker 1: crown Prince and the deputy crown Prince, because that represents,

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Speaker 1: if you will whether you go to the half next

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Speaker 1: general ration or where really whether skip a generation or two,

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Speaker 1: and that's not just personality competition, but it's generational competition,

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Speaker 1: or Saudi Arabia. We could do hours on this and

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Speaker 1: unfortunately we only have two minutes. So uh, I guess

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Speaker 1: someone up with with kind of a forecast for what happens,

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Speaker 1: You say, isis could target Saudi Arabia. Saudi Arabia has

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Speaker 1: one of the harshest forms of uh Islam in place.

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Speaker 1: I mean, would the people there want that or would

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Speaker 1: they prefer to have things loosened up? This is one

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Speaker 1: of the ironies of history. Saudi Arabia came into being,

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Speaker 1: if you will, from a desert political reform movement, the

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Speaker 1: hobbies and so forth, and the idea was to bring

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Speaker 1: this rather pure form of Islam to the peninsula. Well

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Speaker 1: that will be isis is refrain that Saudi Arabia has

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Speaker 1: grown fat and corrupt, westernized, and you know, you have

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Speaker 1: ten thousand princes who are on the public dole and

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Speaker 1: they're gonna argue that they they're gonna bring back this

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Speaker 1: pure form of Islam. And I actually think that will

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Speaker 1: appeal to a significant percentage of these young Saudi men

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Speaker 1: who are under or unemployed, and who are frustrated by

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Speaker 1: what they say as a pretty empty future. How much

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Speaker 1: you to Still, I guess that we've got forward here.

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Speaker 1: Shannon O'Neill has been just wonderful on something bigger and

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Speaker 1: broader than just Argentina or Brazil. Explain her value holistically

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Speaker 1: looking at all of South American, Latin America, shouting on Yales.

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Speaker 1: A senior fellow at the Council on Foreign Relations, She's

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Speaker 1: our leading expert on Latin America. She's probably one of

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Speaker 1: the country's leading experts on Mexico. What I think she

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Speaker 1: can do as well or better than anyone is is

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Speaker 1: talk about the various competing political, intellectual, economic trends in

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Speaker 1: the America's And that's what I would have her do.

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Speaker 1: That was that good, Mike. I mean, I just we

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Speaker 1: could just take a coffee break right now and Shannon

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Speaker 1: just called. The check is in the mail, Richard Hass

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Speaker 1: thank you so much for the Consulate for Relations and

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Speaker 1: everything from Shannon O'Neill's virtues to Oberlin College pole vaulting.

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Speaker 1: A young lad did fourteen feet fourteen zero zero for

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Speaker 1: Oberlin at the Ohio meddle. It's Bloomberg's surveillance. Bloomberg Surveillance

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